Foreclosure Crisis
Floor Speech
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Mr. TURNER. Well, I want to thank Brad Miller for his leadership on this issue. This is a very important issue that affects our whole country. And we all took a pause as we saw our financial institutions shaken nationally. And as the bailouts were proposed that came here to this floor to be voted upon, across the country, Americans wondered, How did we get here? How did this happen?
Now I voted against every bailout that came here to this floor. And I voted against it because not only did I believe that they were not structured appropriately, that there was money that was going to be wasted, but more importantly, not one of them included a change in the laws that would prohibit the type of practices that got us here to begin with. The toxic assets that people talk about are these mortgage-backed securities that were traded and sold upstream. They were the securities that were based upon practices of mortgage lending that had a negative impact on our families and a negative impact on our communities.
And today I wanted to offer my support for the recently passed bill, H.R. 1728, Mr. Miller's bill, the Mortgage Reform and Anti-Predatory Lending Act of 2009. This bill directly addresses the root causes of the current financial and economic crisis in the United States as well as how it has led to some home abandonment and high foreclosure rates throughout the country.
Mr. Speaker, the United States is experiencing a steady increase in foreclosures and mortgage lending problems that have impacted homeowners, families, communities, the United States economy and global economies. In 2006, there were an estimated 1.3 million foreclosures in the United States. This number has increased by 79 percent in 2007, bringing the estimated number of foreclosures nationwide to 2.2 million. In 2008, an estimated 3.2 million foreclosures were reported nationwide. Estimates suggest that this trend is likely to continue with millions more of Americans potentially losing their homes to foreclosure in the next 4 years and with foreclosures not abating until perhaps 2011.
Recently, an analysis by the Associated Press reported that Ohio has three of the most vacant neighborhoods in the United States where home foreclosure and abandonment have devastated neighborhoods with parts of northwest Dayton, Ohio, in my district, with more than 40 percent of the area being vacant. This statistic makes northwest Dayton the ninth emptiest neighborhood in the Nation. If you look at the 2008 foreclosure rates in my district, there have been 4,091 foreclosures in Montgomery County, the primary county of my district. There were 1,558 foreclosures in Warren County, 287 foreclosures in Clinton County, and 351 in Highland County.
These statistics become even more real when I open the pages of my local newspaper. When I was home over the past couple of weeks, I looked at the newspaper, and I actually compared the number of pages that actually contained news to the number of foreclosures. The Dayton Daily News the other day showed up on my doorstep. It had 14 pages of news nationally and worldwide and 14 pages of foreclosures. Those are foreclosures that affect families, communities and neighborhoods, the families that live there, the children that live there, and the neighbors that live next to the homes, and the neighborhoods that begin to decline upon foreclosure and abandonment.
According to a study commissioned by Jim McCarthy, the head of the Miami Valley Fair Housing Center in my district, the mortgage foreclosures associated with lenders who are identified as subprime lenders increased at an annual rate of 43 percent from 1994 to 2000. This number is more than double the annual 18 percent rate increase associated with lenders who are not identified as subprime lenders. The study also showed that foreclosure filings in Montgomery County, Ohio, nearly doubled from 1994 to 2000 and that subprime lenders were responsible for a disproportionately high share of that increase. In Montgomery County, the number of predatory lending complaints since 2001 have risen to 5,326.
Home foreclosures resulting from predatory lending take a toll on American cities. Properties which are foreclosed often sit vacant for long periods of time and not only become an eyesore but become a threat to public health and to safety. Boarded-up neighborhoods, falling property values, and increased crime all lead to an eroded local tax base and impair a city's ability to provide important services to urban families.
Additionally, when I served as mayor of the city of Dayton and faced this issue and how it impacts homeowners, my community continued to wonder how the financial markets would be able to sustain the losses associated the mortgage foreclosures. Beyond the individual impact resulting from predatory lending, these practices were resulting in the loss of capital in the market that cumulatively, one would expect that it would have an impact.
Now, I want to show you some of the boards that I have beside me. These are the home foreclosure numbers for Montgomery County for the years starting in 1997 to 2008. Since I have been in Congress here for 6 1/2 years, in a county that has a population of slightly more than 500,000, there have been about 27,000 foreclosures in the community. The number of families that are impacted, the number of houses in the neighborhood is just really astounding.
I wanted to show you a representative map of a neighborhood that would show you what that would look like from the early period, before this period here starting from 2004 on where we have the higher numbers, as the foreclosure crisis began in the community. This is one Dayton neighborhood in northeast Dayton. You can see probably on the camera just a few of the streets and the make-up of the area. But for every dot you see on this map, that represents a foreclosure. This is just the period from 1997 to 2003. We haven't even imposed upon this map what occurred from 2003 forward.
If you imagine, that means that just about everybody living in the neighborhood lives next to a house that went through foreclosure. And what is unfortunate is that a lot of those houses then go on to abandonment. When a house is foreclosed, a family might walk away. And many times families are left in the neighborhood living next to houses like these that become boarded up, sources for criminal activity, lowering the property
values and trapping everyone. If these houses were subject to predatory lending and their neighbors were not, the neighbors still are impacted by predatory lending by having these types of occurrences in their neighborhood and next to them.
Well, today, Mr. Speaker, the impact of all of this is clear. It does impact our financial institutions. And it does impact the very fabric of our financial institutions for our community and our country. These are the toxic assets that everyone speaks about. When they talk about toxic assets and mortgage-backed securities, they talk about the real-life foreclosures that have occurred. And predatory lending practices have contributed a disproportionate amount to those impacts.
I believe that homeownership is a privilege that everyone should enjoy. But we must not allow for the dream of homeownership to be shattered because of questionable and less-than-honest mortgage lending practices that can steal individuals' futures. That is why I'm pleased to commend my colleague, Brad Miller, on his leadership on this issue and work on securing the passage of H.R. 1728 in this body.
Brad, we appreciate it. The families who have been impacted appreciate it. This is an important step of changing the rules so that we don't continue the practice of creating toxic assets.
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MR. TURNER. Well it has definitely gone down. And Brad, you make some excellent points. Now our community in Dayton, Ohio, and the surrounding counties, Warren, Clinton and Highland, that are in my district, we are not an area of the country which saw these large spikes in property values. We had very modest property appreciation. What happened most of the time, I believe, and the Montgomery County Fair Housing Center has statistics where this has been proven out, is that through predatory lending practices and what I believe are also fraudulent lending practices, the loan-to-value ratio got out of kilter. They would lend people more money than their house was worth. Structurally, you cannot maintain that. You are going to have a foreclosure if someone leverages their entire equity.
I will give you an example. Someone might have a house that is worth $70,000. A lender comes to them and says, well, your house is really worth $100,000. I will give you $10,000 cash out of your equity. And then they will charge them $15,000 in fees that are rolled up and capitalized into the loan, so the family now has a $100,000 loan on a house that was worth $75,000. They got $10,000 to send their kid to college or pay medical bills. But they are now sideways because the house really isn't worth $100,000.
So if you have then an economic event where they have difficulty in making that mortgage payment, it is different from economic down turns we have had before. When we have had economic down turns before, people still had equity in their home. They might be able to sell their home or they might be able to try to make the payments on the lower value. But once you have a loan on a house that is greater than its value, and people do not have the money to cut the check for the difference, they are going to walk away. And they are structurally going to have to leave that home behind. The bank is going to foreclose and take it. You're going to have this abandonment.
And what you just said, Brad, what is really important, is the people who live next to that house, who didn't have a predatory loan, who didn't take a loan out greater than their value, now see their property values drop because the house next door to them is now abandoned.
We have seen stagnation in property values and growth in the Dayton area, some declines. People who live next to a home that has been in foreclosure see their property values decline. So it is something that doesn't just impact the family. These numbers you see here of people who have had their home where they have lost it in foreclosure are multiplied by the number of people who live next to those homes. And in some neighborhoods because there are so many that this has happened, the whole neighborhood sees the decline.
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. TURNER. Well it has definitely gone down. And Brad, you make some excellent points. Now our community in Dayton, Ohio, and the surrounding counties, Warren, Clinton and Highland, that are in my district, we are not an area of the country which saw these large spikes in property values. We had very modest property appreciation. What happened most of the time, I believe, and the Montgomery County Fair Housing Center has statistics where this has been proven out, is that through predatory lending practices and what I believe are also fraudulent lending practices, the loan-to-value ratio got out of kilter. They would lend people more money than their house was worth. Structurally, you cannot maintain that. You are going to have a foreclosure if someone leverages their entire equity.
I will give you an example. Someone might have a house that is worth $70,000. A lender comes to them and says, well, your house is really worth $100,000. I will give you $10,000 cash out of your equity. And then they will charge them $15,000 in fees that are rolled up and capitalized into the loan, so the family now has a $100,000 loan on a house that was worth $75,000. They got $10,000 to send their kid to college or pay medical bills. But they are now sideways because the house really isn't worth $100,000.
So if you have then an economic event where they have difficulty in making that mortgage payment, it is different from economic down turns we have had before. When we have had economic down turns before, people still had equity in their home. They might be able to sell their home or they might be able to try to make the payments on the lower value. But once you have a loan on a house that is greater than its value, and people do not have the money to cut the check for the difference, they are going to walk away. And they are structurally going to have to leave that home behind. The bank is going to foreclose and take it. You're going to have this abandonment.
And what you just said, Brad, what is really important, is the people who live next to that house, who didn't have a predatory loan, who didn't take a loan out greater than their value, now see their property values drop because the house next door to them is now abandoned.
We have seen stagnation in property values and growth in the Dayton area, some declines. People who live next to a home that has been in foreclosure see their property values decline. So it is something that doesn't just impact the family. These numbers you see here of people who have had their home where they have lost it in foreclosure are multiplied by the number of people who live next to those homes. And in some neighborhoods because there are so many that this has happened, the whole neighborhood sees the decline.
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Mr. TURNER. Absolutely. In Ohio, we have had significant job loss, and that goes to part of the economic crisis that people are seeing.
But when you have people's home values drop, just as you said, they have less wealth. And when they have less wealth, they are less secure, so they are less secure in proceeding with other purchases.
But an issue that also impacts them is when the value of your house goes down because someone else has gone into foreclosure, the value is not there and you are also stuck, unable to sell your home. There are people now, who because of the number of foreclosures that have occurred in the neighborhood, were holding onto their house, and that has a suppressing impact on the economy also. If the value was still there, they might sell their home and move on.
BRAD, I commend you again for your bill. Throughout the country, people know we have a foreclosure crisis. They know there is a foreclosure crisis which goes straight to the issue of toxic assets, which goes straight to the financial stability of our financial institutions. This bill, unlike the bailouts that were passed, goes straight to the issue of trying to stop these practices so that we don't continue to crank out toxic assets. That will provide stability in the market where people will have some confidence that these loans that are being given have some standards behind them and that families are not put at risk.
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Mr. TURNER. Exactly to what you said, one other thing that I want to talk about is the issue of how people feel about this.
There are people who live next to abandoned homes that went into foreclosure, who have made their payments and have seen their property values drop, and they know that lenders took advantage of the families in their neighborhoods, and those lenders are part of where the tax dollars are going for these bailouts. They want to know when are these lenders, when are they going to be held accountable and stopped from these types of activities. That is what your bill does. It goes to saying we are not going to allow the lenders to continue these practices. Elements of your bill will have a huge impact on neighborhoods and families. Thank you for advancing it.
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